Question

In order to level the playing field in trade between the U.S. and China, U.S. policymakers have called upon China's government to allow the Yuan (China's currency) to float freely, as other world currencies. Through government regulation, China maintains an undervalued currency, which results in:___________

a. More buying power for Chinese consumers who want to purchase U.S. goods and goods from other countries.
b. Maintaining robust Chinese exports and a favorable balance of trade for China.
c. Developing better relations with industrialized countries who want to increase the value of their exports.
d. Stability and strength of the Chinese Yuan against the U.S. dollar and the euro.

Answer 1

b. Maintaining robust Chinese exports and a favorable balance of trade for China.

Step-by-step explanation:

China is a country that has giant export benefit because they are able to produce goods and services cheaper than most other countries, to capitalize on this advantage they keep exchange rates lower so that their exports are cheaper and they have a competitive advantage of lower prices in the world market. Keeping the currency undervalued allows China to keep their exports cheaper and thus take advantage of a favorable balance of trade.

Hope that helps.